Impact of Consumer Ethnocentrism and Country of Origin Image on

Consumer Beliefs and Attitudes to Purchase Products Made In

Indonesia and Malaysia:

Case study of West Kalimantan, Indonesia and Sarawak, Malaysia

Heriyadi Kusnaryadi

Doctor of Philosophy

2016

Impact of Consumer Ethnocentrism and Country of Origin Image on Consumer

Beliefs and Attitudes to Purchase Products Made In Indonesia and Malaysia:

Case study of West Kalimantan, Indonesia and Sarawak, Malaysia

Heriyadi Kusnaryadi

A thesis submitted

In fulfillment of the requirement for the degree of Doctor of Philosophy in Marketing

Faculty of Economics and Business

UNIVERSITI MALAYSIA SARAWAK

2016

i

Dedication

This Thesis is dedicated to:

My Mother, Mother in Law,

My Wife, My Son and Daughter, My Brothers, My Sister,

for pray, support and understanding to make this work possible.

ii

Acknowledgement

First and foremost, I give thanks to Allah SWT most gracious most merciful for His blessings,

grace and mercy to me throughout all the days of my life.

I would like express my sincere appreciation to my supervisor, Prof. Dr. Ernest Cyril de Run

for his guidance, direction, and friendship throughout the course of this thesis. I am grateful

for his unlimited support and assistance throughout my doctoral program.

I express deep appreciation to Universiti Malaysia Sarawak (UNIMAS) and Faculty of

Economics and Business. I also thank Dean of FEB AP Dr. Rohaya bt Mohd Nor,

Dr. Mohamad Affendy Arip, Prof. Dr. Shazali Abu Mansor, Associate Professor Chin-Hong

Puah, Ph.D, Associate Professor Dr. Mat Jaiz, Prof. Dr. Abu Hassan Md Isa, Dr. Norizan

Jaafar, Dr. Jamal Abdul Nasir, Dr. Evan Lau, Dr. Kartinah, Mr. Khairul, and all Lecturers and

Staff in FEB for giving me the confidence to remain in the study when that was all that I

needed to continue.

A big thank you also goes to Rektor of Tanjungpura University Prof. Dr. Thamrin Usman,

Dean of Economics Faculty Prof. Dr. Eddy Suratman, Prof. Asniar Subagiyo, Dr. Ali Alwi,

Mr. Amry A. Machjus, Rudi Mardiansyah, Dr. Titik Rosnani, Dr. Erna Listiana, Dr. Barkah,

and to all those at Economic Faculty of Management Study Program, University of

Tanjungpura Pontianak, West Kalimantan who have helped me during my PhD program.

iii

Thanks are owed to these individuals who at one time or another who have cheered and

helped me on: Ilzar Daud, Dr. Dwi Sunu Kanto Slamet Widodo, Sisnuhadi, and Dr. Fariastuti

Djafar.

And last, my thanks go to my family, brothers and sister and gratitude to my mother for her

blessing and prays for my continued success, my mother in law, to my wife Rinny Yusnita

Absari, for her love, support, patience and understanding, and my children, M. Rafi and Alya

for your smile and always cheer me up.

iv

Abstract

The globalization of business and marketing has provided consumers, all over the world, with

many options to purchase products. The situation is more complex especially in the area

where the regions as part of the share lands and boundaries between countries like Sarawak-

Malaysia and Kalimantan Barat-Indonesia. In the international marketing literature’s theories,

tremendous attention has been given to examining the extent to which the image of the

country-of-origin of the product and consumer ethnocentrism influences consumer perception

and product evaluation. But still, the research about country image and consumer

ethnocentrism that is conducted in the border area is very rare and limited. This study

investigates the attitudes of the consumers and how they evaluate the products from both

countries (Indonesia-Malaysia). The objectives of this thesis is to justify the relationship

among variables (consumer ethnocentrism, country of origin image, Beliefs, and Attitudes)

based on the framework of the proposed model. Moreover, this thesis explores the mediating

role of COI and Beliefs on the relationship of consumer ethnocentrism with attitudes and

relationship between COI and attitudes. These relationships will each be assessed at the level

of product involvement (High-Low), cross-national characteristics (Indonesia-Malaysia), and

the cross-culture of the ethnic groups (Malay-Chinese Malaysian Chinese and Malay-

Indonesian). The structural equation modeling (SEM) approach is employed in this study. The

proposed reach a better goodness of fit. Hence, the proposed model can be used to explain the

influence of Consumer Ethnocentrism and Country of origin image on beliefs and attitudes

for both Car and Noodle. All hypothesized relationship and mediating effect are supported.

v

Pengaruh Ethnosentrisme Pengguna dan Imej Negara Asal pada Keyakinan dan Sikap

Pengguna untuk Membeli Produk Buatan Indonesia dan Malaysia: Kajian Kes

Kalimantan Barat, Indonesia dan Sarawak, Malaysia

Abstrak

Globalisasi perniagaan dan pemasaran telah memberikan pelanggan, di seluruh dunia,

dengan banyak pilihan untuk membeli produk. Keadaan ini lebih kompleks khasnya di

kawasan di mana daerah tersebut adalah sebahagian dari kawasan sempadan antara negara

seperti di Sarawak-Malaysia dan Kalimantan Barat-Indonesia. Dalam teori literatur

pemasaran antarabangsa, perhatian yang luar biasa telah diberikan untuk menyemak sejauh

mana imej negara asal produk dan etnosentrisme pelanggan berpengaruh terhadap persepsi

pelanggan dan penilaian produk. Walaubagaimanapun, penelitian tentang imej negara dan

etnosentrisme pengguna yang dilakukan di kawasan sempadan sangat jarang dan terhad.

Penyelidikan ini mengkaji sikap pelanggan dan bagaimana mereka menilai produk dari

kedua negara (Indonesia-Malaysia). Tujuan utama dari tesis untuk menjelaskan pengaruh

etnosentris dan kesan Imej Negara Asal terhadap Keyakinan dan Sikap pelanggan dalam

konteks Indonesia dan Malaysia. Selain itu, tesis ini meneroka peran pembolehubah

perantara dari imej negara asal dan keyakinan pada hubungan antara ethnosentris pengguna

dan sikap pengguna serta hubungan antara imej negara asal dan sikap. Hubungan ini akan

dinilai pada setiap satu tahap penglibatan produk (tinggi-rendah), ciri-ciri merentasi negara

(Indonesia-Malaysia), dan silang budaya bagi kumpulan etnik (Melayu-Cina Malaysia dan

Melayu-Cina Indonesia).Pendekatan Pemodelan Persamaan Struktur dilakukan dan sebagai

hasilnya, kajian ini berjaya membangunkan model baru, model yang menyeluruh yang

vi

dicadangkan adalah model yang lebih baik untuk menjelaskan pengaruh etnosentrisme

pengguna dan imej negara asal terhadap keyakinan dan sikap tehadap produk asing. Semua

hubungan hipotesis dan kesan perantaraan disokong.

vii

Table of Contents

Dedication i

Acknowledgement ii

Abstract iv

Abstrak v

Table of Contents vii

List of Tables xiii

List of Figures xvii

List of Abbreviations xix

CHAPTER 1: INTRODUCTION

1.1. Background of Study 1

1.2. Problem Statements 5

1.3. Research Question 8

1.4. Research Objectives 9

1.5. Research Scope 9

1.5.1 . Research Setting 9

1.5.2 . Unit of Analysis 11

1.6. Research Context 11

1.7. Significance and Expected Contribution ot the Study 15

viii

1.8. Summary 17

CHAPTER 2: LITERATURE REVIEW

2.1. Introduction 18

2.2. Country Image Country of Origin Image (COI) 18

2.2.1. Definition of Country Image 18

2.2.2. Operationalization of Country Image 21

2.3. Consumer Ethnocentrism 24

2.4 Products Beliefs and Consumer Attitudes 28

2.5. Consumer Ethnocentrism and Country Image 30

2.6. Country of origin effects or Country Image and Product Evaluation 34

2.7. Consumer Ethnocentrism and Product Evaluation 39

2.8. Sub-Cultural differences in COO effects on Product Evaluation 41

2.9. Type of Product Involvement influence on COI effects on Product Evaluation 44

2.9.1. Measuring Purchase Involvement 46

2.9.2. The distinction between types of involvement 47

2.9.3. Underlying meaning of involvement 47

2.9.4. Construct validity of involvement 47

2.10. Gaps in the Current Research 50

2.11. Conceptual Framework 52

2.12. Summary 59

ix

CHAPTER 3: RESEARCH DESIGN

3.1. Introduction 61

3.2. Research Hypotheses Development 61

3.3. Measurement of Constructs 64

3.4. Questionnaire Design 65

3.5. Questionnaire Language 66

3.6. Questionnaire Pretest 66

3.7. Research Design 67

3.8. Preliminary Design and Pretest 67

3.9. Pretest Overview 68

3.10. Main Research Design 76

3.10.1. Population 77

3.10.2. Sampling Design and Sample Size 77

3.10.3. Data Collection Procedure 78

3.11. Data Analysis 80

3.12. Structural Equation Modeling (SEM) 80

3.12.1 Two Stage SEM Approaches 81

3.12.2 Measurement Model (CFA) Validity 83

3.12.3 Structural Model 86

3.12.4 Model Fit Evaluation 87

x

3.13. Direct and Indirect Effect 89

3.14. Summary 90

CHAPTER 4: FINDINGS

4.1. Introduction 91

4.2. Study in Kalimantan Barat 91

4.2.1. Profile of Respondents 91

4.2.2. Test of Normality 92

4.2.3. Analysis and Results of Structural Equation Modeling (SEM) 94

4.2.3.1 First Stage – Measurement Model 94

4.2.3.2 Second Stage – Structural Model 108

4.2.4. Structural Equation Modeling (SEM) for Alternative Model 114

4.2.5. Comparison between Holistic Model and Flexible Model 117

4.2.6. Mediating Effects for Car 119

4.2.7. Mediating Effects for Noodle 122

4.3. Study in Sarawak 126

4.3.1. Profile of Respondents 126

4.3.2. Test of Normality 126

4.3.3. Analysis and Results of Structural Equation Modeling (SEM) 128

4.3.3.1 First Stage – Measurement Model 128

4.3.3.2 Second Stage – Structural Model 140

xi

4.3.4. Structural Equation Model (SEM) for Alternative Model 146

4.3.5. Comparison between Holistic Model and Flexible Model 149

4.3.6. Mediating Effects for Car 151

4.3.7. Mediating Effects for Noodle 154

4.3. Summary 157

CHAPTER 5: DISCUSSION AND CONCLUSION

5.1. Introduction 158

5.2. Discussion of Findings of Kalimantan Barat Study 158

5.2.1. Direct cause and effect relationships between Consumer Ethnocentrism,

Country of Origin Image (COI), Beliefs and Attitudes 158

5.2.2. Mediating Effects 162

5.3. Discussion of Findings of Sarawak Study 166

5.3.1. Direct cause and effect relationships between Consumer Ethnocentrism,

Country of Origin Image (COI), Beliefs and Attitudes 166

5.3.2. Mediating Effects 171

5.4. Conclusion 174

5.5. Implication 175

5.6. Limitations 176

5.7. Future Research Direction 177

5.8. Summary 178

xii

REFERENCES 179

APPENDICES

xiii

List of Tables

Table 1: Sarawak Import-Export to Kalimantan 2005-2011 1

Table 2: Review of Country Image Conceptualisations 19

Table 3: Examples of CETSCALE mean values by country 27

Table 4: Summary of Measurement of Construct 65

Table 5: Binomial Test for Noodles in Sarawak-Malaysia 69

Table 6: Binomial Test for Passenger Cars in Sarawak-Malaysia 69

Tabel 7: Binomial Test for Noodles in Kalimantan Barat-Indonesia 70

Tabel 8: Binomial Test for Passenger Cars in Kalimantan Barat-Indonesia 70

Table 9: Mean Value of Noodle’s PDI Based on Ethnicities in Sarawak-Malaysia 71

Table 10: Independent Sample Test for Noodle’s PDI in Sarawak 72

Table 11: Mean Value of Passenger Car’s PDI Based on Ethnicities in Sarawak-Malaysia 73

Table 12: Independent Sample Test for Passenger car’s PDI in Sarawak 73

Table 13: Mean Value of Noodle’s PDI Based on Ethnic Groups in West Kalimantan

Indonesia 74

Table 14: Independent Sample Test for Noodle’s PDI in Kalimantan Barat 74

Table 15: Mean Value of Passenger Car’s PDI Based on Ethnic Groups in West

Kalimatan Indonesia 75

Table 16: Independent Sample Test for Passenger car’s PDI in West Kalimantan 75

xiv

Table 17: Independent Sample Test for Noodle’s PDI between Sarawak and

West Kalimantan 76

Table 18: Independent Sample Test for Passenger car’s PDI Between Sarawak and West

Kalimantan 76

Table 19: Sampling Distribution in Sarawak and West Kalimantan 78

Table 20: Assessment of Fit 88

Table 21: Profile of Respondents from West Kalimantan 92

Table 22: Scale Items and Descriptive Statistics 93

Table 23: Research Constructs and Its Description for West Kalimantan Study 96

Table 24: Measurement Model (CFA) for All Variables (Constructs) 103

Table 25 : Factor Loading of Items for Car 104

Table 26 : Factor Loading of Items for Noodle 105

Table 27 : AVE and CR for Car 106

Table 28: AVE and CR for Noodle 107

Table 29: Correlations of Constructs for Car 107

Table 30: Correlations of Constructs for Noodle 108

Table 31: Underlying Hypotheses for Structural Equation Modeling 109

Table 32: Findings for Hypothesized Relationships 111

Table 33: Findings for Hypothesized Relationships between Variables for Car based on

Ethnic Groups 111

xv

Table 34: Findings for Hypothesized Relationships 113

Table 35: Findings for Hypothesized Relationships between Variables for Car based on

Ethnic Groups 113

Table 36: Overall fit of Flexible Model for Car and Noodle 117

Table 37: Comparison Overall fit between Holistic and Flexible Model for Car 118

Table 38: Comparison Overall fit between Holistic and Flexible Model for Noodle 118

Table 39: Profile of Respondents 126

Table 40: Scale Items and Descriptive Statistics 127

Table 41: Research Constructs and Its Description for Sarawak Study 129

Table 42: Final CFA Result of All measurement model 135

Table 43: Factor Loading of Items for Car 136

Table 44: Factor Loading of Items for Noodle 137

Table 45: AVE and CR for Car 139

Table 46: AVE and CR for Noodle 139

Table 47: Correlations of Constructs for Car 139

Table 48: Correlations of Constructs for Noodles 140

Table 49: Underlying Hypotheses for Structural Equation Modelling 141

Table 50: Findings for Hypothesized Relationships for Car 143

Table 51: Findings for Hypothesized Relationships between Variables for Car based on

Ethnic Groups 143

xvi

Table 52: Findings for Hypothesized Relationships for Noodle 145

Table 53: Findings for Hypothesized Relationships between Variables for Car based on

Ethnic Groups 145

Table 54: Overall fit of Flexible Model for Car and Noodle 149

Table 55: Comparison Overall fit between Holistic and Flexible Model for Car 150

Table 56: Comparison Overall fit between Holistic and Flexible Model for Noodle 150

xvii

List of Figures

Figure 1: Map of Borneo which includes Sarawak-Malaysia and West Kalimantan 11

Figure 2: Halo Model 54

Figure 3: Summary Construct Model 55

Figure 4: Flexible Model 57

Figure 5: Conceptual Model to diagnose the influences of Consumer ethnocentrism, COI,

Beliefs on Attitudes. 58

Figure 6: Process of Two Step Approach in SEM 82

Figure 7: A SEM model with direct and indirect effect example 89

Figure 8: Initial Measurement Model (CFA) for Ethnocentric (EC) 99

Figure 9: Final CFA of Measurement Model for Ethnocentric (EC) 101

Figure 10: Final Structural Model for Car 110

Figure 11: Final Structural Model for Noodle 112

Figure 12: Structural Model of Flexible Model for Car 115

Figure 13: Structural Model of Flexible Model for Noodle 116

Figure 14: COIM mediates EC-BP Linkage for Car 119

Figure 15: COIM and BP mediate EC-ACM Linkage 120

Figure 16: BP mediates COIM-ACM Linkage for Car 122

Figure 17: COI mediates EC-Beliefs of Maggi (BM) Linkage for Noodle 123

xviii

Figure 18: COIM and BM mediate EC-ANM Linkage for Noodle 124

Figure 19: BP mediates COI-ANM Linkage for Car 125

Figure 20: Final Measurement Model (CFA) for Ethnocentric (EC) 133

Figure 21: Final Result of Structural Model for Car 142

Figure 22: Final Result of Structural Model for Noodle 144

Figure 23: Structural Model of Flexible Model for Car 147

Figure 24: Structural Model of Flexible Model for Noodle 148

Figure 25: COII mediates EC-BK Linkage for Car 151

Figure 26: COII and BK mediate EC-ACI Linkage for Car 152

Figure 27: BK mediates COII-ACI Linkage for Car 153

Figure 28: COI mediate EC-Belief (BS) Linkage for Noodle 154

Figure 29: COI and Beliefs mediate EC-ACM Linkage for Noodle 155

Figure 30: BP mediates COI-ACM Linkage for Car 156

xix

List of Abbreviations

COO Country of Origin

COI Country of Origin Image

CI Country Image

CE Consumer Ethnocentrism

EC Ethnocentric as symbol for SEM

COII Country of Origin Image of Indonesia

COIM Country of Origin Image of Malaysia

BK Beliefs on Toyota Kijang

BP Beliefs on Proton Car

BS Beliefs on Mi Sedaap

BM Beliefs on Mi Maggi

ACI Attitude toward Car from Indonesia

ACM Attitude toward Car from Malaysia

ANI Attitude toward Noodle from Indonesia

ANM Attitude toward Noodle from Malaysia

1

CHAPTER 1

INTRODUCTION

1.1 Background of Study

The globalization of business and marketing has provided consumers in all over the

world, with many options to purchase products. The situation is more complex especially in

the area where the regions as part of the share lands and boundaries between countries like

Sarawak-Malaysia and West Kalimantan-Indonesia (Blatter, 2000; Ghosh, 2011). In these

regions (Sarawak-Malaysia and West Kalimantan-Indonesia), products from both sides can

be found easily. People in these regions also already had familiarity and attitude about both

sides and their products (Awang et al., 2013). This phenomenon makes the study of

consumers’ attitude toward foreign made products more important to be studied (Kaynak &

Kara, 2002; Netemeyer et al., 1991).

Table 1 show the statistic of Export-Import between Sarawak and Kalimantan can be

seen as follows:

Table 1: Sarawak Import-Export to Kalimantan 2005-2011

YEAR KALIMANTAN

IMPORT (RM) EXPORT (RM)

2005 156,061,903 58,825,409

2006 180,121,305 74,712,135

2007 266,642,681 115,966,226

2008 88,526,211 120,332,168

2009 74,248,337 67,071,508

2010 79,814,989 144,185,495

2011 54,691,049 174,148,153

Source: Department of Statistics, Malaysia 2011

2

The value of imports from Sarawak (Malaysia) to Kalimantan (Indonesia) was reduced from

2005 to 2011. However, the exports of Sarawak (Malaysia) to Kalimantan (Indonesia) was

increased significantly and reached RM174,148,153 in 2011 mainly dominated by food

(71,58%) and Beverage (14,41%).

In international marketing literatures and theories, attention had been given to

examining how consumers form their attitudes and evaluate the foreign countries products.

There are two main factors that can influence consumer attitudes and purchase decisions,

which are the image of country-of-origin of product (country image) and consumer

ethnocentrism. Most of the studies validated the existence of the country image and

consumer ethnocentrism effects on consumer attitudes and product evaluation (Acharya &

Elliott, 2001; Peterson & Jolibert, 1995; Samiee, 1994; Schooler, 1965). Several issues also

have been considered, including product involvement, buyer’s involvement, familiarity with

a product category, knowledge of a particular country, cross-cultures, knowledge of product

and the presence of other extrinsic product information cues (Johansson, 1989; Knight &

Calantone, 2000).

Country of origin image (COI) or country image is the overall picture, or perception,

of consumers toward a country or toward products originating from a particular country

(Erickson et al., 1984; Han, 1986, 1989; Haubl, 1996; Parameswaran & Yaprak, 1987).

Country-of-origin image (COI) also refers to consumer perceptions of products from a

particular country. These perceptions may be based on prior perceptions of the country’s

production and marketing strengths and weaknesses (Roth & Romeo, 1992). Since it was

first reviewed by Ditcher (1962), an up to date assessment of the study of Country-of-origin

3

image (COI) has become a major stream for theory and practice in the field of global and

international marketing. Many evidences have shown how Country-of-origin image (COI)

can affect the consumer attitude in evaluating products (Bilkey & Nes, 1982; Eroglu &

Machleit, 1989; Han, 1989; Han & Terpstra, 1988; Roth & Romeo, 1992; Tse & Gorn,

1993).

Consumers provide different views on products originating from different countries

(Baughn & Yaprak, 1993; Jaffe & Nebenzahl, 2001; Liefeld, 1993; Verlegh & Steenkamp,

1999). These views may be obtained from information relevant to Country-of-origin image

(COI) from numerous sources, such as education, the media, travel, marketing cues, and

origin associations. The origin associations may have been provided through made-in labels,

brand names, advertising, packaging, and other parts of the marketing mix. Liefeld (1993)

concluded that Country-of-origin image (COI) appears to influence the consumer attitudes

and evaluate product quality, risk, likelihood of purchase, and other mediating variables. The

nature and strength of the country of origin image effects depend on such factors as the

product category, product involvement, the product stimulus employed in the research,

respondent demographics, consumer prior knowledge, experience with the product category,

the number of information cues included in the study, and consumer information processing

manners.

In evaluating a product, different information cues about a product are deemed to be

important and utilized. Consumers are thought to make inferences about the value of product

information cues as a quality indicator and then combine judgments of all the cues available

in order to obtain an overall product evaluation (Jacoby et al., 1971). According to this